It’s no secret that Canadians are facing significant challenges with rising interest rates and costs of goods. Grounded by the cooperative model, credit unions are naturally suited to help Canadians navigate challenging macroeconomic times through their deep connections and purpose of supporting their members and communities to improve their financial resilience and health.

Eloise Duncan — CEO and Founder, Financial Resilience Institute — recently talked with us about the Institute’s latest Financial Resilience Index Model and potential innovation opportunities for credit unions.

What is financial resilience?

Financial resilience is defined and measured through our index as a household’s ability to get through financial hardship, stressors and shocks as a result of unplanned life events. At the Financial Resilience Institute, we work with credit unions, co-operatives, non-profits and other organizations across Canada to help improve financial resilience for all. This includes people who are more financially vulnerable or underserved by their financial institutions.

The Seymour Financial Resilience Index TM measures household financial resilience across nine behavioural, sentiment and resilience indicators. We are measuring this resilience at the national, provincial, segment and individual level for Canadians and credit union members through the Institute’s own Financial Resilience Index model.

This Index is being used as a community asset for good, shining a light on Canadians’ financial vulnerability and spurring financial health innovation across Canada.[1] Leading financial institutions, like Vancity, Co-operators and others, work with us to measure and track the financial resilience and well-being of their customers, members and communities, compared to the index’s benchmark data.

What are the key findings of the latest index?

The February 2023 Index showed that Canada’s mean financial resilience score is 51.24, which means at the national level Canadians are just “Approaching Resilience.”

Financial vulnerability affects all household income demographics and impacts 78 per cent of households (just under 20 million Canadians) despite the hard work many Canadians are putting into maintaining their financial resilience.

For example, as of February 2023, seventy per cent of Canadians have significantly reduced their non-essential expenses (up significantly from 56 per cent in June 2022), despite 84 per cent of households reporting that the increase in the cost of living has outpaced any income growth they’ve seen.

Financial stress, which we’ve been tracking since 2017, is also a major problem impacting the health and well-being of many Canadians.

What does the Index say about credit unions’ members’ financial resilience and financial well-being?

Nationally, credit union members have a mean financial resilience score of 51.19 with 78 per cent of them experiencing some level of financial vulnerability. Of those, 15.5 per cent are considered “Extremely Vulnerable” (a financial resilience score of 0 to 30). We see many members facing specific financial stressors and being impacted by challenges such as housing affordability, rising interest rates, job insecurity and, of course, the high cost of living.

Nearly half of all primary credit union members (48 per cent) feel that their credit union has helped improve their financial wellness over the past year, compared to only 43 per cent of Canadians who feel the same about their primary financial institution.

Among credit union members who demonstrate high levels of financial resilience (with a score of 70.01 to 100), an even greater percentage (57 per cent) rate their credit union highly for delivering support for financial wellness. Conversely, members who are more financially vulnerable tend to rate their credit union lower for financial wellness support.

Through our extensive research and collaboration with clients and partners, we’ve discovered that credit unions have a unique opportunity to support their communities to enhance their financial stability, health, and overall well-being — all while building stronger relationships and distinguishing themselves from their competitors. Navigating a financial journey is a lifelong process, and credit unions can play a pivotal role in it.

Looking ahead, how can credit unions better support their members from a financial resilience and well-being perspective?

There are many ways that credit unions can drive impact and innovate, building on their strengths.

• Embed data-driven solutions and provide targeted support. Offering financial health checks, digital tools, practical tips and help combined with relevant timely financial advice, are all ways to make a difference. Here are a few examples:
  • Create new or enhanced programs and services to support financially vulnerable members to build their financial resilience with nudging, help and support.
  • Lead the way in improving the financial wellness of your employee members.
  • Help more members with financial planning tools and encourage proactive financial planning, leveraging insights from our recent report commissioned by FP Canada and the Institut québécois de planification financier.
  • Provide your members with financial literacy and financial resilience tools for their specific needs and pain points, enhancing the overall member experience.
  • Collaborate with others to provide unique offerings that address areas related to protection, financial stressors and life events.

• Delve deeper to understand your members’ financial well-being. To truly grasp your members’ financial well-being, it’s essential to go beyond conventional metrics like credit scores and income to identify financially stressed members. Looking at things like over-leveraged mortgage holders or those grappling with debt are some examples of going deeper. From there, you can provide proactive, targeted support and solutions to members of specific segments, such as women wanting to save, plan and invest, particularly given the environment we are in with the latest interest rate rise. This approach can deepen relationships and create win-win outcomes for your members, communities and credit union.

• Incorporate a financial resilience lens into your diversity, equity and inclusion, and climate strategies. This is good for business and creates strong sticky relationships, differentiation, profitable growth and impact. Credit unions can foster partnerships to identify and quantify financial inclusion and access-to-help gaps for communities such as Indigenous Canadians, millennials, renters and people struggling with their debt. At the Financial Resilience Institute, we collaborate with credit unions to create targeted programs and offerings, including new projects, financial coaching and planning support. We also measure the impact of these initiatives on your members’ financial resilience scores and assess the business benefits compared to other investments.

Financial health and resilience innovation is a journey, and we’re excited to grow our non-profits’ impact and partner with credit unions to help support systems change and create resilient communities. This is core to credit unions’ DNA and difference and is needed, especially given the challenging times we’re all living through and the fact that 75 per cent of Canadians want to better understand and improve their financial resilience.

To go further

• The June 2023 Financial Resilience Index release will be published over the next two months, with a free ecosystem summary report and detailed Index data and analytics available through report subscription on the Financial Resilience Institute’s website.
• Check out this short video on financial vulnerability and financial stress as a mainstream issue.
• More insights are available in the Institute’s free reports, with other reports published thanks to the support of funders and supporters.

About Financial Resilience Institute

Financial Resilience Institute is a non-profit organization dedicated to improving the financial resilience and well-being of Canadians and global citizens. It is the leading independent authority on financial resilience and financial well-being in Canada. The Institute was founded by Eloise Duncan, a previous Credit Union national young leader supported by an expert Board and Advisory Council.

Created in February 2020, the Financial Resilience Index has been peer-reviewed by Statistics Canada, UN-PRB, Haver Analytics and many organizations using it such as Vancity, Co-operators and others.

For further information or to explore how the Institute can support your Credit Union in your financial health and resilience innovation journey contact eloise@finresilienceinstitute.org or follow the Institute on LinkedIn.

[1] Households are scored from 0 to 100 across nine behavioural, sentiment and resilience indicators. ‘Extremely Vulnerable’ households have a financial resilience score of 0 to 30, ‘Financially Vulnerable’ a score of 30.01 to 50, ‘Approaching Resilience’ households a score of 50.01 to 70 and ‘Financially Resilient’ households a score of 70.01 to 100. Households from income demographics are represented across all four Index segments with people moving forward and slipping back based on changing behaviours, accessing social capital, financial help and other stressors or enablers.